Coronavirus: Commercial Considerations

Friday 20 March 2020

On Wednesday 11 March 2020, the COVID-19 outbreak was elevated to “pandemic” status by the World Health Organisation (WHO). This was then followed by the announcement of Rishi Sunak’s budget for 2020, which included a number of policies aimed at helping businesses navigate through the rising panic, and which has been coined “The Coronavirus Budget”.

Here at Blacks, we thought it would be helpful to prepare some guidance on how to mitigate the impact of coronavirus on your business, which we hope you find useful.

Force Majeure

A force majeure clause is included in a contract in order to protect the parties from potentially being in breach of a contract because of an event that was completely out of the parties’ control, such as an act of God (i.e. natural disaster), terrorist attack, government sanction, or war.

Coronavirus may have already had an impact on your business, such as on suppliers, throughout the chain and due to unavailability of the workforce due to travel restrictions, restrictions in manufacturing (for instance in China) and workers being advised to stay at home.

We advise that you check your contracts and review whether a) there is a force majeure clause; and b) what it says exactly.

Contracts have to expressly include a force majeure clause for businesses to be able to rely on one, as they aren’t implied into contracts, so it is important to check. Some force majeure clauses may not seem to cover off a pandemic so the wording is particularly important, as some may be more restrictive than others and they may differ from contract to contract.

For example, some clauses may expressly include a pandemic as a force majeure event, and therefore would give recourse in relation to the particular contract as coronavirus has now been labelled a pandemic. Some may simply refer to a force majeure event being one that is “an exceptional event which is beyond the control of the parties”, which may be broad enough to cover coronavirus.

Businesses could now be faced with the parties they have contracts with, and rely on, trying to enforce a force majeure clause in order to get out of performing under their contracts, which could have a knock on effect and there could be cost implications, depending on the terms of the contract.

However, it is important to bear in mind that prudent parties should mitigate the effects of the pandemic, such as sourcing materials from other suppliers. Reliance on force majeure clauses may also have repercussions on funding arrangements.

In short, our advice is to check your contracts and put plans in place for the effect of force majeure clauses now. It may be prudent to try to include infectious disease clauses in contracts going forward in order to protect your business as the pandemic continues.

Frustration

If a contract is frustrated, it is because it is rendered impossible to perform as a consequence of the pandemic. Frustration can be a difficult claim to make and depends on the circumstances of each case.

Responsible advertising

Businesses which advertise products claiming to treat, prevent or cure coronavirus or to exploit fear, in the wake of the pandemic in order to sell products, have been warned by the Advertising Standards Agency.

Responsible pricing

Businesses have also been warned not to take advantage of panic by increasing prices and have even reminded the public to be careful when reselling goods (presumably, such as face masks and hand sanitiser which may become scarcer for periods of time).

Other guidance

Companies House has extended time limits, for companies which have been affected by the pandemic, for filing their accounts.

The Information Commissioner’s Office has issued guidance in respect of companies having to process and share more personal data in respect of health and threats to the public.

We also advise businesses to check updates from the WHO regularly, conduct risk assessments now and ensure compliance with health and safety guidance.

In this uncertain time, please don’t hesitate to contact a member of our Corporate team today if you have any queries.